Larger hedge funds dominate industry landscape, as 2020 proves to be the “year of outsourcing” (link)
The study found that the dispersion in returns between the top performers (90th percentile) and bottom performers (10th percentile) was 57.5 per cent for the year, with larger funds again outflanking their smaller counterparts across multiple metrics.
“The key takeaway for fund performance last year was that size matters,” Citco observed in the report.
That also proved to be the case when measuring capital flows, as the bulk of investor inflows headed to managers running more than USD5 billion, while those funds under USD5 billion saw net outflows during 2020.
2020 proved to be the year of outsourcing, as hedge funds adapted to homeworking. Citco’s Treasury Services saw “significant client adoption” throughout the year, with collateral, trade matching and OTC settlements services growing at an “incredible rate.”
This trend has maintained momentum into 2021, the report observed, as new funds launched with smaller operational footprints and mature funds switch their middle office functions to their administrator to focus internally on higher value tasks.
The BKCoin Digital Asset Fund aims to capitalise on price inefficiency and volatility within cryptocurrencies using an algorithm-based trading model in response to cautions from institutional investors due to the speculative nature of crypto.
“For us, the key was building a strategy that would minimise the volatility of bitcoin so that traditional allocators would pay attention to it. So we came up with a market neutral strategy.”
"We started  year managing roughly USD10 million, ended the year at USD35 million and our aim is to get to USD100 by the end of 2021. That growth, and the amount of appetite from traditional investors towards us, has been tremendous.”
“Until two years ago, inter-exchange arbitrage and currency pair arbitrage was huge. Buying on one exchange and selling on the other for more than 50 per cent arbitrage – that kind of alpha is something you can’t find in any other asset class,” he says.
As more institutions are getting comfortable allocating capital into solely bitcoin or ether, they are also starting to look at active strategies, which is where Kang sees opportunities for further growth.
It’s All About Valuation as Asia Stock Investors Buy the Dip (link)
Investors should use the latest selloff to buy stocks that have yet to price in an economic rebound and longer-term trends. Southeast Asian shares, Chinese banks and beaten-down electric-vehicle makers feature among the top picks.
The gauge is currently trading at 16.7 times its 12-month forward earnings after falling more than 1% on Monday as investors sold tech stocks, down from 18.3 times in mid-February.
Singapore is emerging as a favorite within Southeast Asia -- a region seen as a safe haven from any yield havoc. The cyclicals-heavy, old economy-oriented market is trading at one of the lowest forward price-to-earnings ratios in Asia.
JP Morgan Asset and UBS Wealth say electric vehicles are worth buying on dip. "If enterprise value-to-sales ratios fall to about six or seven times, they “could warrant another look”.
Bank stocks have rallied hard this year amid optimism that reopenings and vaccine rollouts will boost lending, deal-making and consumer spending. Chinese banks make for particularly undervalued recovery-related plays, with an eye for Korean lenders and private sector banks in India.
Former Elliott Executive Tuil to Start New Activist Hedge Fund (link)
Former Elliott Management Corp. executive Franck Tuil plans to start a new activist hedge fund, Sparta Capital Management, that will invest in public and private companies around the globe, with a particular focus on Europe.
Sparta Capital will also adopt a similar set of strategies that Tuil oversaw at Elliott on a smaller scale, including investing across the capital structure in both equities and credit, the people said.
Several opportunities are presenting themselves in Europe in the wake of the coronavirus and the price dislocation it has created. Several high-profile European companies have been targeted by investors in recent years pushing for a change in strategy or governance.
Tuil, who left Elliott last year, aims to launch Sparta Capital in the third quarter with more than $600 million in assets under management.
Death of 60/40 Portfolio Makes Returns Tougher for Wealth Funds (link)
Singapore’s GIC Pte and Australia’s Future Fund said global investors have relied on the bond market to simultaneously juice returns for decades, while adding a buffer to their portfolio against equity market risks. Those days are gone with yields largely rising.
The six major ways in which markets have changed with the pandemic, including increased regulatory intervention, higher inflation risks, additional drivers of performance and more “fragile” markets.
“You can’t hide in the corner and not invest any more because we have to get our returns and I don’t think it’s the kind of environment where we should be doing that.” says GIC's CEO Lim Chow Kiat.
Lim also cautioned about too much government stimulus and its effect on inflation.
Investors will also have to deal with geopolitical risks, said Lim, whose fund has posted a real return of 2.7% annualized over the past 20 years.